S&P warned that Greece could lose its financial lifeline if voters elect a government that opposes the terms of Greece's bailout program. Greece is set to hold an election June 17 after last month's voting failed to result in a governing coalition.

However, S&P said that if Greece abandoned the euro, other euro area nations would be unlikely to follow suit.

S&P argues that the hardships Greece would suffer by reverting to its own currency would dissuade other nations from following suit. In addition, European leaders would be eager to demonstrate that Greece is a special case and would act quickly to support other struggling governments.

S&P said leaving the euro and bringing back the drachma would "seriously damage" the Greek economy and that it would take years for Greece to realize any benefits from devaluing its currency.

"In our opinion, adopting a national currency is likely to be very costly for the Greek population," the report states.

S&P warned that the European Central Bank and central banks in the eurozone have total exposure to Greece of about €200 billion. But the agency said a default by Greece would not undermine the central bank's credibility or the reserve currency status of the euro.

Meanwhile, the IMF will probably be able to avoid losses on its €20 billion loan by enforcing its "preferred creditor status" if Greece defaults, according to the report.

But the European bailout fund will likely "face significant losses," said S&P. The European Financial Stability has long-dated exposure of €108 billion to Greece.